THE PERSONAL MANAGER AGREEMENT

IVAN HOFFMAN, B.A., J.D

In the entertainment industry,
actors, recording artists and other creative talent (all called “artist”
or “artists” here) often engage the services of a personal manager.
The manager is the party who is supposed to hold the vision for the artist’s
career, advising the artist about what roles to take, what kind of deals
to make, who to hire and fire and many other such issues. Often the
manager may provide funding as well. The manager gets a percentage
of the gross revenue received by the artist.

Despite the prevalence
of such managers in the entertainment industry and despite the prevalence
of the entertainment industry in California, California law does not expressly
recognize the legal existence of the manager. By this I mean that
the manager is not an occupation that is regulated or licensed under California
law.

The definition of an “artist”
is quite broad. Labor Code 1700.4(b) states:

‘Artists’ means actors and actresses rendering services
on the legitimate stage and in the production of motion pictures, radio
artists, musical artists, musical organizations, directors of legitimate
stage, motion picture and radio productions, musical directors, writers,
cinematographers, composers, lyricists, arrangers, models, and other artists
and persons rendering professional services in motion picture, theatrical,
radio, television and other entertainment enterprises.

Labor Code section
1700.4 et. seq. provides for the licensing and regulation of talent agents.
The statute defines a “talent agency” as

a person or corporation who engages in the occupation
of procuring, offering, promising, or attempting to procure employment
or engagements for an artist or artists, except that the activities of
procuring, offering, or promising to procure recording contracts for an
artist or artists shall not of itself subject a person or corporation to
regulation and licensing under this chapter. Talent agencies may, in addition,
counsel or direct artists in the development of their professional careers.

Labor Code section
1700.5 provides in part:

No person shall engage in or carry on the occupation
of a talent agency without first procuring a license therefore from the
Labor Commissioner. . .

This statutory set up has
allowed artists to void their agreements with their personal managers if
those personal managers acted as a “talent agency,” meaning that the personal
manager sought “employment or engagements” for the artist.
As a practical matter, in the early part of an artist’s career sometimes
artists are not represented by an agent and thus it often falls upon the
shoulders of the manager to seek such work, either by calling clubs for
the performer to work in, calling producers to get parts for the actor
and so on. As a practical matter as well, doing so subjects the manager
to having the manager’s agreement with the artist declared void and allowing
the artist to not only get free of that agreement but may also require
the manager to return the commissions the manager earned under the now-voided
agreement subject to the period of the statute of limitations set forth
in the statute.

Political lobbying being
what it is, personal managers were able to convince the California legislature
to include the “except that” language above since many managers were and
remain instrumental in obtaining recording agreements for artists and thus
that conduct is permissible under the statutory scheme.

Furthermore, when there
is a dispute between an artist and a manager, Labor Code section
1700.44 provides that the Labor Commissioner is the forum that initially
must decide whether the matter falls within the Labor Commissioner’s jurisdiction.
Traditionally, this has meant that provisions in a personal management
agreement calling for arbitration to determine controversies were disregarded
until the Labor Commissioner made its ruling.

However, the United States
Supreme Court ruled that the Federal Arbitration Act took precedence over
the state law and that the arbitration provisions would be held valid notwithstanding
the said law. (Preston vs. Ferrer)

Moreover, statutes are
not always what they seem to be and a recent case from the California Court
of Appeals (this case involves only California state law but there may
be laws in your state that may be similar to these laws) involving the
actress Rosa Blasi has pointed out an exception to the said statutes.
In Marathon Entertainment, Inc. vs. Blasi, these were the facts
as summarized by the Court:

In December 1998, Marathon and Blasi entered into an
oral contract for Marathon to serve as Blasi's personal manager in exchange
for a percentage of her entertainment employment income. Blasi, who was
represented by a licensed talent agent throughout the term of her personal
management contract with Marathon, terminated the management contract in
the fall of 2001. Thereafter, Blasi successfully invoked Marathon's alleged
violation of the Act's licensing requirements as a defense to her obligation
to pay Marathon a commission on her 2000-2001 earnings from the television
series Strong Medicine, an engagement that Blasi does not contend was procured
by Marathon in violation of the Act. After being sued by Marathon for the
unpaid Strong Medicine commission, Blasi moved for summary judgment of
the complaint, contending that Marathon's unlicensed {Slip Opn. Page 3}
solicitations of other, unrelated employment opportunities on her behalf
had so tainted with illegality the parties' oral management contract that
the entire contract must be invalidated as an illegal contract for unlicensed
talent agency services. Blasi produced no evidence in the trial court,
however, linking the procurement of her Strong Medicine employment contract
with any illegal activity or violation of the Act by Marathon. The trial
court, without considering the applicability of the general rule of severability
of contracts, granted the motion and entered summary judgment for Blasi.

In other words, Blasi did
not produce evidence that Marathon had violated the statute by seeking
employment for Blasi on the series “Strong Medicine,” although there was
evidence produced that Marathon had sought employment for Blasi in other
instances. Blasi contended that such seeking employment, even if
not related to “Strong Medicine,” “tainted” the overall contractual relationship
so that it was not possible to separate the elements of that relationship
and thus the entire contractual relationship should be voided.

Severability of Contracts

Again, this applies to
California law but it may be that a similar law exists in your state.

Civil Code section
1599 provides:

Where a contract has several distinct objects, of which
one at least is lawful, and one at least is unlawful, in whole or in part,
the contract is void as to the latter and valid as to the rest.

The Court summarized the
state of the law in this regard.

In determining whether to apply the doctrine of severability
of contracts, the courts must consider the main objective of the parties'
agreement. If the illegality is {Slip Opn. Page 9} collateral to and severable
from the main purpose of the contract, then severance is appropriate. (Abramson
v. Juniper Networks, Inc. (2004) [citation omitted].) If, however,
the taint of illegality so permeates the entire agreement that it cannot
be removed by severance or restriction but only by reformation or augmentation,
the courts must invalidate the entire agreement. (Id. at p. 660.)

The overarching consideration in determining whether to allow
a severance of an agreement is whether the interests of justice would be
furthered by severing the agreement. (Little v. Auto Stiegler, Inc. (2003)
[citation
omitted].) A severance is more likely to be granted if separating the
legal and illegal parts of the agreement would: (1) "conserve a contractual
relationship [without] condoning an illegal scheme . . . ."; and (2) "prevent
parties from gaining undeserved benefit or suffering undeserved detriment
as a result of voiding the entire agreement -- particularly when there
has been full or partial performance of the contract. [Citations.]" (Armendariz
v. Foundation Health Psychcare Services, Inc. (2000) [citation omitted])

In general, contracts made in violation of business licensing
statutes may be severed if it is appropriate to do so. As we mentioned
earlier, the Supreme Court reversed a summary adjudication in Birbrower,
supra [citation omitted], based on the possibility of severing an
attorney fee contract of a New York law firm that had practiced law in
California illegally without a license under Business and Professions Code
section 6129. Because California does not regulate legal services provided
outside California and the firm had provided some services in New York,
Birbrower stated that "notwithstanding an illegal consideration, courts
may sever the illegal portion of the contract from the rest of the agreement.
[Citation.]" (Birbrower, supra, 17 Cal.4th at p. 138.) It is only "[i]f
the court is unable to distinguish between the lawful and unlawful parts
of the agreement[ and] 'the illegality taints the entire contract, [that]
the entire transaction is illegal and unenforceable.' [Citation.]" (Ibid.)

Similarly, in Johnson v. Mattox (1968) [citation omitted],
the appellate court upheld the severance of an unlicensed contractor's
construction contract made in violation of Business and Professions Code
section 7031. That statute expressly {Slip Opn. Page 10} prohibits the
enforcement of construction contracts of unlicensed contractors. Even though
the unlicensed contractor in Johnson could not recover its illegal construction
fees, it was permitted under the doctrine of severability of contracts
to recover $650 for the lawful sale of goods that were not fixtures and
were not related to the illegal construction activities.Even contracts that are made in violation of public policy may
be severed if it is appropriate to do so. In Whorton v. Dillingham (1988)
[citation
omitted], for example, the appellate court found that a possibility
existed of severing the parties' Marvin agreement (Marvin v. Marvin (1976)
[citation omitted]), because although the agreement expressly relied
upon some illegal consideration (the couple's sexual relationship), the
agreement also relied upon other legal consideration independent of the
sexual relationship (being a chauffeur, bodyguard, secretary, and partner
and counselor in real estate investments).

The Court found that there
was sufficient basis for “severing” the 2 elements of the agreement.

Conclusion

There are always the “Yeah,
buts” of the law. What you appear to see may not always be what you
get.

This article is not legal advice and is not intended as legal advice.
This article is intended to provide only general, non-specific legal information.
This article is not intended to cover all the issues related to the topic
discussed. The specific facts that apply to your matter may make
the outcome different than would be anticipated by you. This article
is based on United States law. You should consult with an attorney
familiar with the issues and the laws of your country. This article
does not create any attorney client relationship and is not a solicitation.

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